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Blog Archive

Monday, November 27, 2017

Tips for Navigating State v. SEC Advisory Regulations

By Cory Roberson, Principal at RIA Review and RIA Consults

Who’s my regulator------- State?  SEC?  FINRA?  DOL?  NASAA? 
With the complexities of multi-jurisdictional regulations, firms are tasked with interpreting the application of regional uniform securities/advisors act rules and national guidelines from the SEC, NASAA, FINRA (formerly NASD) and/or the DOL. 

State (Advisors/Uniform Securities) v. SEC (Advisors/Securities) Rules

Advisors can dig a little deeper into the regulatory landscape by taking a holistic look at the differences and similarities between jurisdictions.  Overall, most advisory firms must follow a combination of its home office state rules, other state provisions, and/or SEC provisions.


When assessing advisory level compliance, many state provisions mirror those of the SEC Investment Advisors Act of 1940 with some exceptions:
Financial Statements

For instance, California requires its advisors to: (1) submit annual (or monthly) financial statements when firms hold discretionary authority over funds and/or (2) provide ADV disclosures when/if directly debiting fees.  Both cases are examples of enhanced custody provisions that differ from the SEC, which generally does not require annual financial statement submissions from its advisors who hold discretionary authority of client accounts.  Florida and New York also hold annual financial statement reporting requirements for their registrants.

Another noteworthy difference is that many states hold net worth minimum or bonding requirements for firms. 


Registration/notice filing requirements

Both State and SEC registrants agree on registration and notice filing provisions (Rule 204-1 and similar state rules). Both regulators require firms and at least one qualifying principal (IAR) to register in the state the firm’s principal office is located.

Be aware of regulatory changes.  Advisors who were previously exempt from registration may find that it is now required to register as an advisor or notice file its firm under a specific jurisdiction. 

Firms may be required to register (its firm and/or its “branch office”) if it publicly holds itself out as an advisory firm and/or its crosses state de minimis thresholds for number of clients served. 

Solicitors (whether internal or “third party” marketers) may be required to register depending on state jurisdiction.

Custody Rule

The SEC and most states agree on the definition for the Custody Rule (Rule 206(4)-2) and similar state rules).  Generally, firms who hold custody of client assets are required to either submit annual audited statements and/or be subject to a surprise examination.  

Some states, such as Colorado, deviate from the Custody Rule’s overall surprise audit provision in favor of a “gatekeeper” provision. 

Annual Reviews

The SEC and some state registrants* have annual review requirements as described below:  

·         Florida Rule 69W 600.0014(3)/SEC 2042 (books/records) - annual review of policies and procedures.

·         Washington Rule WAC 460-24A-120 - annual review of policies and procedures.

see annual review blog for more information.  

ADV Form 1A Changes

Recent Form ADV 1A changes apply to all firms.  see Form ADV 1A changes blog for more information

FINRA: FINRA has no direct authority over solo advisors with no broker-dealer affiliations or brokerage activities.  In these cases, FINRA is simply the administrator of the web CRD/IARD system.  The SEC, NASAA (for test administration), and state securities regulators use this system as a part of its’ filing/registration requirements.  

DOL:  For all advisors who serve retirement plan clients, the Department of Labor (DOL) and SEC both enforce the Employee Retirement Income Securities Act (ERISA). They are now in the process of redefining the term “Fiduciary” in a piece of legislation that shares the hotly contested term’s namesake (“Fiduciary Rule”). 

For now, the DOL is delaying its full enforcement of the Fiduciary Rule in a move likely influenced by the SEC’s call for interpretation into its broader implications.

NASAA: On the state level, the North American Securities Administrator Association (NASAA), a self-regulatory organization, provides general guidance, Uniform Securities Act guidelines, administration of testing, and resources. 

Creating a Compliance reporting map to categorize regulations

Lastly, after gathering a list of regulatory requirements, we recommend that firms categorize their compliance duties based on their business model.  Once achieved, firms should also make sure these requirements are included in their policies and procedures manuals.  

See the example below

Corporate Level
Firm Level
Rep Level
Securities Level
Fund Level

Corporate Documents

LLC/C-Corp Securities

Registered investment Advisor (RIA)

Investment Advisor Representative (IAR)

Registered Representative (Hybrids)

Securities issuer

Initial Public Offering

Initial coin Offering

Private Placements

Registered Fund (i.e. open/closed end funds

Private Fund (registration or exemption)

Sign up for our Compliance Management Software for our overview of reporting requirements. 

Don’t be caught by surprise. We recommend contacting our consulting arm to discuss your needs.  

Compliance and Business Management

FIN Compliance ( is a consortium of compliance services including: RIA Consults-Roberson Consults Group, a compliance consulting firm, RIA Review, a compliance-management software tool (SaaS), B-D Review, a RIA/Broker-Dealer compliance management software tool, and FINLancer is a business management portal featuring:  E-signature tools; Invoicing integration, Vendor Directory, continuity directory*, business client document portal, and more (available by Q3 2019).  Access all services on one site:


FIN Missions ( provides business support group sessions for other entrepreneurs.  In addition, Cory has volunteered for more than fifteen youth programs in locations such as like S. Korea, China, S. Africa, Thailand, and India.

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